Stocks plunged to a new low for the year yesterday as investors left the market amid fears over the recount of votes in the presidential election and a possible rise in US interest rates.
The TAIEX lost 215.21 points, or 3.56 percent, to close at 5,825.05 yesterday on turnover of NT$66.35 billion.
Domestic institutional investors bought a sparse NT$460 million of shares, but overseas investors dumped a net NT$10.8 billion of shares, and proprietary traders sold a net NT$1.92 billion.
The bellwether Taiwan Semiconductor Manufacturing Co, the world's largest maker of made-to-order chips, dropped NT$2 to NT$55, and Hon Hai Precision Industry Co, the nation's largest electronics maker, fell NT$6.5 to NT$122.5.
"Obviously, overseas investors shifted gears from Asia to the US market to take advantage of the upcoming hike in interest rates and the appreciating greenback, which further spooked local investors," said Evonne Chang (張雅雲), an analyst at JF Taiwan Ltd.
The US announced last week that 600,000 new jobs had been created in March and last month, which led to speculation about a rate increase and sent a shockwave through Asian financial markets.
While the TAIEX fell 3.56 percent, Hong Kong's Hang Seng Index declined 3.57 percent, the South Korean market 5.73 percent and Japan's benchmark Nikkei Index tumbled 4.84 percent to its lowest level since the attacks of Sept. 11, 2001.
The vote recount contributed to investor jitters, despite the strength of the fundamentals of Taiwan's publicly traded companies, Chang said.
Francis Yu (於貽勳), managing director of UBS Securities Ltd Taiwan, said he is still positive about the outlook for Taiwan's stock market, noting that the TAIEX has outperformed other Asian markets.
"I think Taiwan is still a tempting place for foreign investors ? They will come back after the cloud of political uncertainty dissipates," Yu said.
President Chen Shui-bian (陳水扁) will deliver his inauguration speech on May 20. He is expected to allay fears over the cross-strait situation, said Peter Hsieh (謝杰良), a manager for Polaris-Protime Securities Consultants.
Another boost to the TAIEX will be the upgrading of Taiwan's weighting in the MSCI indices, which is expected to happen in the middle of next month, Hsieh said.
Both Hsieh and Chang suggested investors consider handset component makers, as these companies posted strong results for the first quarter and are expecting a bumper second quarter.
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